Final Results for 30 September November 2013

Transcription

1 Final Results for 30 September November 2013 Ketso Gordhan - CEO Tryphosa Ramano - CFO Richard Tomes - Joint MD (SA) Njombo Lekula - MD Zimbabwe 1

2 Agenda Context Financial Overview Divisional Overview Strategy & Outlook Questions 2

3 Context For the financial year ending September 2013 PPC s total cement sales up 7% Supported by strong volume growth in SA and Zimbabwe Botswana and Mozambique remain under pressure PPC margins under pressure Input costs higher due to electricity prices, depreciation and sub-optimal sourcing Margins in Lime and Aggregates divisions contracted due to weaker demand 3

4 Context For the financial year ending September 2013 PPC SA s cement volumes up 7% This compares favourably to SA cement industry sales - up 4.2% for 9 months from October 2012 to June 2013 Growth achieved despite deceleration in GFCF Gross Fixed Capital Formation: % change 4

5 Context Key events Progress on rest of Africa projects Significant progress with construction at CIMERWA Ltd, Rwanda Construction of 1.4 mtpa plant in Ethiopia has commenced Construction of 1 mtpa plant in the DRC to start in Q Final bankable feasibility in Zimbabwe/Mozambique underway for 1.2 mtpa output Zimbabwe and Slurry operations celebrated their centenaries in 2013 Inaugural bond issue 4.6 times oversubscribed Announced acquisition of Safika Cement, awaiting regulatory approvals Acquired a further 25% of Pronto Readymix, balance in May 2014 Implemented BBBEE II; Eight fully converted mining rights, two in process Construction of 60MW wind energy facility at our Grassridge site in Nelson Mandela Bay began in October

6 Strength beyond the Bag Building a Sustainable Corporate Kambuku Revitalisation Profiling SB Cement (age 53) Factory Operator Support Years of service: 24 FY 2013 basic salary: R6 854 FY 2013 total cost: R salary increase (6.5%): R 446 Management Investment: R 875 FY 2014 new basic: R8 175 FY 2014 new total cost: R Net change of 17% I think PPC is a very fair & caring company, Nomawonga Speelman, PPC Port Elizabeth 6

7 South Africa Botswana Zimbabwe Mozambique Financial Overview 7

8 F2013 Financial overview Revenue R8.32bn 13% [R7.35bn] EBITDA # R2.50bn 8% [R2.33bn] EBITDA margin # 30.1% [31.7%] Cash generated from operations R2.89bn 26% [R2.28bn] Normalised operating profit # R1.98bn 6% [R1.87bn] Normalised earnings per share # 214 cps 16% [185 cps] Normalised HEPS 215 cps 16% [185 cps] Final dividend 118 cps [108 cps] Net debt to EBITDA 1.5 times [1.4 times] # Excluding BBBEE IFRS 2 charges, Zimbabwe indigenisation and restructuring costs 8

9 F2013 Summary income statement % R million R million Change Revenue Cost of sales (15) Gross profit Administration and other operating expenditure (27) Operating profit before items listed below BBBEE IFRS 2 charges Zimbabwe indigenisation costs 93 - Operating profit Net finance costs (3) Exceptional items (1) - Earnings from equity accounted investments 20 7 Profit before taxation Taxation Profit for the year Impacted by sub-optimal sourcing due to Dwaalboom technical issues and Slurry mill upgrade. Also increases in electricity and depreciation Costs of restructuring and business development as well as increased business and regulatory compliance costs No STC charge due to change in tax legislation (2012: R53m) EPS (cents) HEPS (cents) Normalised EPS (cents) # Normalised HEPS (cents) # DPS (cents) # Excluding BBBEE IFRS 2 charges, Zimbabwe indigenisation and restructuring costs 9

10 F2013 Segmental analysis 10% Revenue split per division 4% 24% Revenue split per region Cement Lime Aggregates South Africa International 86% 76% Revenue (R million) Sept 2013 Sept 2012 Cement Lime Aggregates Group EBITDA margin Sept 2013 Sept 2012 Cement 32% 33% Lime 20% 23% Aggregates 14% 19% Group 30% 32% Revenue from outside of South Africa has risen steadily, now at 24% 10

11 F2013 Summary balance sheet 2013 R million 2012 R million ASSETS Non-current assets Property, plant and equipment Intangibles and goodwill Other non-current assets Current assets Inventories Trade and other receivables Cash and cash equivalents TOTAL ASSETS EQUITY AND LIABILITIES Capital and reserves Non-controlling interest Non-current liabilities Deferred taxation Long-term borrowings Provisions and other non-current liabilities Current liabilities Short-term borrowings Trade and other payables TOTAL EQUITY AND LIABILITIES CIMERWA plant expansion and translation impact of foreign subsidiaries Further investments in Pronto (R110m) and Habesha (R16m) Includes CIMERWA total assets of R1.1bn CIMERWA (R516m) and PPC Zimbabwe (R62m) Successful R650m bond issue, debt consolidated on CIMERWA acquisition and increased investment and working capital activity 11

12 F2013 Summary cash flow statement Cash flow from operating activities 2013 R million 2012 R million Operating cash flows before movement in working capital Net movement in working capital 399 (33) Net finance costs paid (247) (216) Taxation paid (525) (417) Cash available from operations Capital investment in PPE and intangible assets (970) (640) Acquisitions in terms of business combination (140) (42) Other investing activities (109) (166) Net funding raised/(repaid) 94 (73) Net cash flow before dividends paid Dividends paid (770) (706) Net cash inflow for the year Good working capital management Further investments in Pronto (R110m) and Habesha (R16m) 12

13 F2013 Capital expenditure 2013 R million 2012 R million Total for FY2014e R million Western Cape modernisation (De Hoek) Slurry modernisation Zimbabwe Operational capex Capital expenditure before expansions CIMERWA # DRC # Zimbabwe and Mozambique # Total capital expenditure # 60:40 debt: equity ratio applies Slurry finishing mill bag filter 13

14 F2013 Effective taxation rate The effective taxation rate was 35.3% mainly due to the impact of IFRS 2 charges, Zimbabwe indigenisation expenses, non-deductibility of finance costs on BBBEE I transaction and combined with withholding taxes on dividends received 2013 Rm Profit before taxation Taxation 507 Effective taxation rate 35.3% Add back Zimbabwe indigenisation costs 93 Add back BBBEE IFRS 2 charges 48 Adjusted profit before taxation Adjusted effective taxation rate 32.1% The taxation rate excluding withholding taxation would be 31.1% 14

15 Capital structure F2013 net debt to EBITDA of 1.5x, committed to keeping this < 3x Restructuring of R1 billion BBBEE I debt PPC assigned SA national scale long-term and short-term credit ratings of zaa+ and zaa-2, respectively, by Standard & Poor s Successfully established a R6 billion domestic medium term note programme to optimise and diversify sources of funding R650 million raised in March 2013; three year bond, well priced and over subscribed Dividend policy cover range of 1.2 to 1.5 times remains 15

16 South Africa Botswana Zimbabwe Mozambique Divisional Overview 16

17 SA Cement Richard Tomes: MD Cement RSA HND (Civil Eng), MBA (University of Stellenbosch) Johan Claassen: MD Cement RSA BEng (University of Stellenbosch), EDP (Wits Business School) Combined PPC experience of ~40 years 17

18 F2013 Segmental analysis 10% Revenue split per division 4% 24% Revenue split per region Cement Lime Aggregates South Africa International 86% 76% Revenue (R million) Sept 2013 Sept 2012 Cement Lime Aggregates Group EBITDA margin Sept 2013 Sept 2012 Cement 32% 33% Lime 20% 23% Aggregates 14% 19% Group 30% 32% Revenue from outside of South Africa has risen steadily, now at 24% 18

19 PPC SA cement demand PPC s F2013, SA sales volumes up 7% Strong volume growth in Gauteng and inland region, despite increased industrial action A number of commercial property developments under way in Gauteng, including: Cradlestone Mall (West Rand) new office buildings in Sandton phase one of Steyn City near Lanseria Mall of Africa (Waterfall Estate) Volumes in coastal regions recorded growth, despite rising imports and a particularly wet winter season Sales in coastal regions were boosted by growing demand from various renewable energy projects PPC increased selling prices by 4% on average for the year 19

20 SA cement demand Imports Imported cement now accounts for an estimated 7.6% of national demand as at June 2013 Bulk of imports continues to originate from Pakistan, majority enter through the port of Durban FOB price per bag ex-pakistan remains ~R30/bag Cement Imports # Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Durban PE/East London Cape Town # Data sourced from the South African Revenue Service 20

21 PPC SA cement input costs Key cost components for F2013 Proportion of cost of sales (R/t) Cost Movement (R/t) Distribution 27% +8% Input costs up 6% on a rand per ton basis Salaries (R) 10% +5% Depreciation (R) 9% +8% Energy related costs: diesel + coal + electricity = 28% of all input costs Electricity 9% +11% Coal 8% -5% ~35% of the distribution cost comprises of diesel costs Maintenance 7% -4% Packaging 4% - Other 26% +8% Carbon Tax mooted to commence January 2015, with impact of ~R150m on PPC Group 21

22 PPC SA modernisation programmes De Hoek kiln 6 upgrade R280m (2012) Heat consumption and the clinker production rate improved by 5% Significantly improved stack emissions 60% water saving (see case study) Slurry finishing mill 4 upgrade R100m Improved mill reliability and production output, while reducing dust emissions 15% improvement in energy consumption 22

23 Lime, Aggregates and Readymix Lime Difficult year for PPC Lime; major customers encountered operational interruptions Led to a drop in burnt product sales of 8% with limestone sales reduced by 15% Revenues fell 5% to R798 million (2012: R838 million) Volumes recovered in the second half of the year, and are expected to improve in 2014 Aggregates Revenues grew 12% to R335 million (2012: R299 million) as volume growth in Botswana partially offset marginally lower volumes in SA Increased sales mix of higher value products also contributed positively Key new projects for SA operations in 2014 include Steyn City and Mall of Africa as well as two road construction projects Readymix / Ash Pronto Holdings acquisition: second tranche of 25% paid, final payment due May

24 Outlook Trading conditions in South Africa remain challenging and a new competitor is set to enter the market PPC remains focused on: Improving and optimising current capacity Recently right-sized operations in the coastal regions Continuing to focus on most efficient plants Seeking out further channels for distribution Technical innovations to reduce costs Cement demand in SA is likely to remain in low single digits for the remainder of 2013 and 2014 SA infrastructure programme remains the swing factor 24

25 Zimbabwe Cement Njombo Lekula: MD Zimbabwe Over 20 years PPC experience ND Chemical Engineering (Vaal University of Technology) MBA (University of Stellenbosch) Zimbabwe Celebrated 100 years of production in Zimbabwe Portland Holdings Limited has been an integral part of Zimbabwe s infrastructure development Our cement is found in virtually every key structure in the region including: Harare International Airport and The mighty walls of the Kariba Dam 25

26 Zimbabwe Cement Robust sales environment in F double digit volume growth Cement price increases were marginal due to increased competitor activity Retail sector remains the key driver of local demand Operations performed well: Improving both output and quality of product Increased output had a positive impact on the unit cost of production Voluntary separation process underway Aligned to our modernisation initiative and continued focus on efficiency and cost 120 people applied, US$5m restructuring costs Commissioning of palletiser project on target Optimistic that large government infrastructure projects will materialise Discussions primarily in the energy, water and transport sectors 26

27 Botswana and Mozambique Botswana Botswana economy remains heavily dependent on the diamond mining industry Government has scaled back on infrastructure projects, focus on maintenance Privately funded developments in the new central business centre of Gaborone continue, with increased tender activity and the release of small- to medium-scale road projects Cement sales contracted for the year, with reduced construction and industrial demand partly offset by increased demand in the highly competitive retail segment Mozambique The southern region remains heavily contested, with new capacity commissioned and aggressive pricing from imported product Our export volumes reduced due to logistical challenges after flood damage to the rail line between SA and Maputo Supply of product into the Tete region from Zimbabwe has improved from previous year The imminent completion of the bulk handling facility will further enhance efficiency 27

28 South Africa Botswana Zimbabwe Mozambique Strategy & Outlook 28

29 PPC International Pepe Meijer: MD International BEng (Mech), BB&A (Hons), MBA (University of Stellenbosch) Happy-Girl Buthelezi: Exec Head: Business Development BCom, MBA (UCT Graduate School of Business), Diploma in tax (ICIE), Postgraduate in management accounting (University of Natal) Koos Taljaard: Exec Head: Business Development BEng (Mech) (University of Stellenbosch), GDE (Minerals Economy) (University of the Witwatersrand), MDP (Unisa) Combined PPC experience of >30 years 29

30 Rest of Africa strategy Great opportunity exists in many African countries South Africa s annual per capita cement consumption is 222kg The countries we have invested in, have levels well below 75kg per capita Growth trajectory in these countries remains very positive Per capita Cement consumption (kg) DRC Ethiopia Rwanda Zimbabwe South Africa Per Capita Cement Consumption (kg) Source: Cemnet,

31 Democratic Republic of the Congo PPC to construct a 1 mtpa plant 20km from Kimpese in western DRC for ~$260m Construction to commence in Q and commissioning anticipated in 2016 In-country production of ~ tpa with demand 4-6 times in excess Cement trades at price range of ~US$400 per ton Project Costs 24% EPC Contract Quarry and related 12% 54% Infrastructure Other (incl interest, working capital etc) 10% 31

32 Zimbabwe/Mozambique Final bankable feasibility underway, busy with the EIA study Intend to construct a clinker production facility towards the Zimbabwean border Intend to construct two cement grinding facilities; Harare ( ) and Tete ( ) Construction likely to commence in late 2014 Current Zimbabwean operations in the south of Zimbabwe Successfully concluded indigenisation transaction 32

33 Habesha Cement, Ethiopia PPC has increased shareholding from 27% to 30% for R16 million Construction of the 1.4 mtpa facility has just begun Commissioning to occur 24 months later Project cost remains favourable at US$130 million Factory site well located, 35km northwest from Addis Ababa The plant s future development plan includes an option to double the capacity to 2.8 mtpa 33

34 CIMERWA Limited, Rwanda PPC acquired a 51% equity stake in CIMERWA at the end of 2012 Only cement producer in Rwanda, with ton per annum plant New ton per annum plant under construction, to be commissioned in 2015 Will have 5 stage pre-calciner kiln and use peat as an energy source Cement demand of tpa in Rwanda at selling prices of US$250 to US$300/t Well positioned to meet growing demand in eastern DRC and Burundi where prices reach US$400 per ton 34

35 CIMERWA Limited, Rwanda Progress on the new tpa plant 35

36 CIMERWA Limited, Rwanda Progress on the new tpa plant 36

37 Outlook Three years ahead 2014: expect significant progress on the four projects under way; limited volume growth in SA and limited impact from new entrant 2015: tough year due to significant capex drawdowns and full year impact of new entrant; some optimism for volume growth in SA 2016: upswing as SA begins recovery and cash flows from expansion projects start flowing The team that will lead PPC in 2014 and beyond 37

38 Questions? 38

39 Investor contacts Ketso Gordhan Tryphosa Ramano Azola Lowan Chief Executive Officer Chief Financial Officer Investor Relations Tel

40 Addendum: Southern African cement industry map 40

41 Strategy Overview PPC s strategies are: 1. Enhance our industry leader position in southern Africa ( Keeping the home fires burning strategy) Excel in sales, marketing, customer focus and overall value offering Efficient operations and optimised logistics Renew/upgrade equipment, especially relating to customers or efficiency Acquire businesses with good strategic fit 2. Expand our operational footprint into other parts of Africa ( Rest of Africa strategy) Grow revenue outside South Africa to >40% of group revenue by 2016 Identified attractive markets Invest where: High potential for infrastructure development Low per capita cement consumption Current cement shortages Within 250km of major population centres Avoid proximity to ports (threat of imports) Determined limestone reserves Secured resources: funding and skills Selected an EPC partner 41

42 Disclaimer This document including, without limitation, those statements concerning the demand outlook, PPC s expansion projects and its capital resources and expenditure, contain certain forwardlooking statements and views. By their nature, forward-looking statements involve risk and uncertainty and although PPC believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to be correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of, among other factors, changes in economic and market conditions, success of business and operating initiatives, changes in the regulatory environment, other government action and business and operational risk management. Whilst PPC takes reasonable care to ensure the accuracy of the information presented, PPC accepts no responsibility for any damages be they consequential, indirect, special or incidental, whether foreseeable or unforeseeable, based on claims arising out of misrepresentation or negligence arising in connection with a forward-looking statement. This document is not intended to contain any profit forecasts or profit estimates, and the information published in this document is unaudited. 42